Tuesday, November 14, 2006

Ruthless enough for a startup?

I have been reading about how several successful startups -- Facebook, MySpace, BitTorrent, YouTube, Skype, and HotOrNot -- fueled their early growth that lead to their success.

In all the cases, these startups did things that I probably would not have been willing to do. It makes me wonder how ruthless you have to be to have a successful startup.

Facebook, for example, "had access to the e-mail addresses of Harvard students" and "blasted e-mails to Harvard students to let people know about the site." The site, which allows people to list information about themselves and meet other students, largely seems driven by social interaction, dating, and self-promotion.

Similarly, MySpace "had a database of ~100M e-mail addresses" which they spammed to announce their launch. MySpace is broader than Facebook, but also largely seems driven by social interaction, dating, and self-promotion.

BitTorrent, a P2P filesharing network, launched after "[Bram] Cohen collected a batch of free porn and used it to lure beta testers". The site soon collected "long lists of pirated content" including full length movies and pornographic material.

HotOrNot started as a way to "settle an argument" and soon turned into a popular and lucrative website that is "serving some basic human psychological needs around social validation, ego, and voyeurism" and allows people to "enjoy the voyeuristic aspect of checking people out."

The YouTube founders, when they first launched, "figured the best thing would do would be to get hot chicks involved". Later, they implemented a feature that allowed "one-click emailing to spam a friend about a video." I suspect it is also true that YouTube succeeded where many other video startups failed largely by being less vigilant about purging copyright content and soft porn, all easy to find on the site.

Skype's founders originally created Kazaa, a filesharing network that encouraged illegal trading of copyright content. Skype is a clever iteration from Kazaa. It follows a similar theme of giving away stuff that used to cost money for free, but this time it is legal. Like Kazaa, it uses other people's resources (especially those who are blessed with the privilege of being a supernode) to provide the service.

There seem to be some dismal lessons in these stories. It appears the ideal startup will give away something that used to cost money for free (preferably copyright material and porn), use other people's content and resources, appeal to the baser human instincts (especially vanity and sex), and spam massive e-mail lists at launch.

And this makes me wonder, am I ruthless enough? In Findory Video, for example, the system tries to automatically filter the soft porn that appears quite popular on both YouTube and Google Video. Is that a mistake? Findory has never spammed anyone. Findory keeps well within fair use for copyright material. Findory directs traffic to content providers to help them earn revenue from their work. Are those mistakes?

Is ruthlessness the key to success for Web 2.0 startups? Are you ruthless enough to succeed in the same way these others have done?

Update: Yahoo just acquired Bix, a website that features "hot or not and other contests" and "launched barely three months ago". Yet another example.

I can see the argument, but it doesn't seem universal to me at all. In the web 2.0 category, flickr, del.icio.us, and 37signals don't seem to fit the pattern. Outside that category, I can think of plenty of examples that didn't start by being ruthless. Did Amazon?

At Tabblo we struggle with the same issues: how aggressive do we want to be to attract users? I like to think we're principled (opt-in emailing, no nudity in the public areas, etc). My high school graduating class may not agree after I invited all of them to a tabblo!

Netflix certainly owes a bit of their popularity to people renting porn. It was a rather large competitive advantage against the local Blockbuster.

Google too benefits from things like pornography and gambling. Google Image search? Obviously not the the extent of some of the highlighted companies, but IMO this issue exists with a LOT of companies.

Varying degrees all but one could make a case that at least a portion of the success of these companies is attributable to these kinds of topics.

It's an interesting question, but I'm an optimist on these issues. The examples you cite are all products. Cheap/ruthless tricks may work for a product, but I don't think they help you create business/institution. Are there similar stories for Amazon, Google, Yahoo, Ebay?

You can track the source of some ruthlessness for ad-supported services by following the revenue stream up to AD:TECH. I can think of a lot of legal ideas to get rich fast, but I don't have the passion to execute, or the desire to share any of them. Sometimes I wonder if the money would compensate for the dissatisfaction of not personally believing in what I create. Crap on the world now; make up for it later?

Geeking with Greg is now on my daily read list, and over time, I will also review your blog archives in some detail.

Now to address your post!

The heading is a tad provocative in that you "set up" one frame of reference i.e., a context (and possibly, which may not be entirely useful relative to the intention for your post).

The concluding paragraph then "sets up" further frames of reference as follows... "Is ruthlessness the key to success for Web 2.0 startups? Are you ruthless enough to succeed in the same way these others have done?"

First... I address your questions as follows:

[a] Based on my 35+ years as a successful entrepreneur in the knowledge world... ruthlessness is not "the key to success" for Web 2.0 startups, and

[b] Your second question includes at least three presupppositions (e.g., ruthless, enough, in the same way) which (in my view) are not useful relative to Web 2.0 startups achieving meaningful contribution and success.

Second... during the process of addressing your post I began wondering "What is Greg really seeking to accomplish? I wonder what Greg really wants to learn, accomplish, do?"

Welcome to mankind! If you behave well, if you follow all the rules, you won't "succeed"... because the rules are made by people on top, and their real target is for them to stay on top.

Microsoft encouraged piracy to become a de-facto monopoly, then moved to "zero tolerance" policies for warez. Political activists make large use of rioting and illegal behaviour before being officially recognised as entities, and once in power they obviously have an interest in cracking on those practices to avoid being challenged. Companies often grow thanks to public money, and then decry the practice once it's used by new competitors.

Unfortunately, it's got nothing to do with "web 2.0" or tech startups in particular. Some of the biggest crooks in this world are well-respected and "successful" businessman (Ken Lay anyone?). It's a bad world out there.

If you want to be a successful startup, you MUST give people what they ACTUALLY want, not what you think they should want, or what the government thinks they should want.

If you want to be a successful startup, you must give people what they want that nobody else will give them.

A lot of what people want, that nobody else will give them, lies on the outer edges of what is socially acceptable and 100% legal. If it weren't, somebody else would already be giving them what they want.

Thanks for reading Startup Review - I saw that you referenced a couple of the case studies in your blog post. I have been thinking a lot about what you said in your blog post recently, and here are my thoughts.

I came to the conclusion that to get big really fast, you need either a very social product that gets a lot of word of mouth, or a product that is a great fit for SEO (natural search). I think that there are enough examples of success out there that indicate you don't have to be "ruthless", but you need one of the two of the above going for you. On the word of mouth strategy, it needs to be something that people understand they will derive more value from if other people know about it. This explains the success of Skype, Xfire, Facebook, MySpace, etc. Companies that lack this from a product perspective, need to get a lot of traffic from SEO - look at Digg, Rotten Tomatoes, Zappos, etc.

That's my two cents.

Thanks,Nisan

P.S. I don't know if you remember, but we spoke a long time ago when I was working at Sierra Ventures. I hope that things are going well at Findory.

Greg - great post and some interesting thoughts. As with all issues, nothing is black or white. Some people like their email boxes filled with "offers" and personal letters from Africa about dead oil ministers (but I digress). There is a huge gray area, one that is address by your own personal guideposts. As James Allen wrote in his classic "As A Man Thinketh"...

Circumstances don't make the man, they merely reveal who he really is.

I suppose it depends on your ethical beliefs. Other than the first two (spammers made good...as if anything short of actual divine intervention could ever redeem a spammer), there's nothing on the list I'd consider fundamentally unethical or hesitate to do in my own business if such tactics were applicable. (OK, copyright infringement is borderline, I admit, especially in contexts where an illicitly copied version competes with a version that's being offered for legitimate sale. But on the other hand KaZaa only led to Skype in the sense that it provided a technology platform on which a bona-fide NON-infringing use could be built as a new business.)

Undertoad has a point as well. The commercial internet was dragged into being on the backs of guys with their credit cards in one hand and...well...their other hand also occupied. The wholesome-good-for-you stuff that was online in 1990 didn't attract much attention. A business that takes a sanctimonious outlook about what varieties of content it will tolerate is going to rub a lot of people the wrong way.

Cultivate Virtue in your self,And Virtue will be real.Cultivate it in the family,And Virtue will abound.Cultivate it in the village,And Virtue will grow.Cultivate it in the nation,And Virtue will be abundant.Cultivate it in the universe,And Virtue will be everywhere.

I would have to say you are definately not ruthless enough if you thought that Facebook's move to email all the Harvard Students about the site was over the top. That doesn't sound bad to me at all. I can live with that, however a good example of overly ruthless is Eric Bauman's website Ebaumsworld.com. Bauman has put the Ebaum's tag on videos that weren't actually first provided on Ebaum's world. He's a deceitful bastard.

You should give yourself some credit. You are not selling blue pills or pumping penny stock, but providing real value (congrats on the recommender system btw, it seems to work really well). Of course, any startup would claim the same thing, but your growth figures show you are giving a valuable service. I am sure I would not have minded receiving a findory ad in my mailbox...

I have a related question: how do you plan on competing with google if you can't track page views outside your web site ? The anonymity default is great, but wouldn't some sort of findory firefox extension give interested users even better recommendations ?

Though youtube might have been hugely successful especially after google buying it out, what is the probability that companies like youtube are always successful.

According to me, the probability of success is more if you approach the problem in the right way(without spamming etc...), the profits might be less but the rate of success is higher. But on the other hand, if tricks are used, then profits might sore to new heights but success ratio is less. The reasoning could be the ease of using the tricks like spamming etc...

success = num of companies in the domain that were successful using a particular path BY total num of companies using that particular path

I dont have data to prove it. I have always believed in this and hope it is true :)

Some say that its the number of eyes you have on your product that counts. We easily assume that quality comes over quantity, but unfortunately thats not always the case.

First of all I have to admit that I don't have serious experience about marketing Web 2.0 applications or sites, but I am under an impression that you need to overcome the critical mass before your site or product starts a life of its own. After that the quality counts.